First National Financial LP

Market Commentary: A review of the latest employment numbers, rates and more

  • Andrew Masliwec, Analyst, Capital Markets

Welcome to the 2020 edition of your favourite market commentary.  A lot has happened in the last couple weeks, but I made a New Year’s resolution to not live in the past. So, I probably won’t cover any of it.  

See? 2020 is already off to a great start. It really helps when you set achievable goals.


Where are rates headed these days? That’s a good question. So, if you find out let me know. What I do know is that the current 5-year GoC bond is yielding 1.61% and the 10-year is yielding 1.60%. There’s still a slight inversion in the 5-10 area of our yield curve (also known as the belly). The 30-year GoC is currently yielding 1.71%.  The 5 and 10s are about 6 bps higher than a week ago and only 2 bps higher than this time in December.  Maybe we didn’t miss much after all.

On the credit curve, 5-year Canada Mortgage Bond’s are currently yielding 1.88% and 10-year CMB’s are yielding 1.96%. That’s about 2 bps wider in the 5-year from a month ago and unchanged from a month ago for the 10-year. Compared to the same time last year, the 5-year is 41 bps lower and the 10-year is 52 bps lower. What I am trying to get across is that it’s still a very good time to be a borrower in the Canadian real estate market. Talk to your favourite First National originator today.

Economic News

After November’s UGLY employment number of -71.2K jobs, all eyes were on December’s employment numbers this morning. If you recall, that number also left us with a 0.4 bp rise in the unemployment rate, the worst reading in a decade.

 So how did December do? Much better.  Canadian jobs came in at +35.2K and the unemployment rate retraced 0.3% of the November increase (unemployment rate is now 5.6%).  The underlying details were mostly positive, with the hiring coming in full-time employment and roughly split between the goods (+15.7K) and services(+19.4K) sector. Remember, if the gain was only in seasonal and part-time work in services that would not be nearly as positive.  I say mostly positive because wage growth, the bane of the Canadian economy, had a larger than expected slowdown. Wage growth was expected to be 4.4% year-over-year and the number came in at 3.8%. The 3.8% wage growth number is still a strong number. I mean its higher than the inflation rate, but have you seen the prices of organic CBD-infused kombucha drinks recently? It’s absurd. How are millennials supposed to live?

Bank of Canada

It’s been a while since we spoke about our favourite central bank. The big news was that the Governor, Stephen Poloz, will be stepping down this year. If you’re interested in applying, you can do so at the link below. Just don’t use me as a referral -

Speaking of our soon to be ex-Governor, Mr. Poloz gave a speech yesterday in which he covered a variety of topics including: inter-provincial free trade, data dependency, labour and housing.  Overall, he wasn’t in the cheeriest mood with housing being of concern for the BOC with real estate expectations adding froth and increasing household debt levels. On the global trade side, Poloz noted that although there’s still much uncertainty, damage from the global trade conflict is likely to be permanent. Of note to me, he also spoke about the “outrageous” lack of internal free trade in Canada. I would have to agree. Everyone knows beer is cheaper at Quebec Costco’s.

Overall, the market is looking to July for the next rate cut by the Bank of Canada. If you’re a betting person, those odds are sitting at 35%.

Finally, I almost forgot that brevity was another of my New Year’s resolutions. See you on the flip side.